Honest Tea is considering purchasing $$15$ million of new bottling equipment. If it purchases the equipment, it can depreciate it on a straight$-$line basis $($i$.$e$.20\%$ of the original purchase price per year$)$ for tax purposes over five years, after which the equipment will be worthless. It will also be responsible for maintenance expenses of $$1\mathrm{.}2$ million per year, which it anticipates paying unless it files for bankruptcy. Alternatively, it can lease the equipment under a true tax lease for $$5$ million per year for five years, in which case the lessor will provide the necessary maintenance. Assume Honest Tea$$s tax rate is $35\%,$ its before$-$tax secured borrowing cost is $2\%,$ and it pays corporate income tax and maintenance costs $($if applicable$)$ once a year. The first tax deduction for lease payments $3$ can be applied immediately, whereas the first depreciation tax shield and maintenance payment $($if applicable$)$ comes one year after it receives the equipment.

$($a$)$ Should Honest Tea lease the equipment or purchase it with a lease$-$equivalent loan? Show the calculations you used to make this assessment.

$($b$)$ What is the break$-$even lease rate, i$.$e$.$ the lease payment Honest Tea could pay each year and be indifferent between leasing and buying?